At this time of dramatic American leadership transition, the United States is also at the dawn of an unprecedented transfer of wealth, as aging baby boomers seek to retire, preserve their wealth, and prepare to transfer their assets to the next generation. The American Bankers Association estimates that this transfer of wealth could be as much as seventeen trillion dollars, all of which is potentially subject to significant taxation. These boomers have built businesses, invested in real estate and acquired other valuable property. Now, many have highly appreciated assets that they want to sell so that they can enjoy their retirement and plan for their heirs. However, these people are also searching for safe and legal ways to preserve their wealth so that they can benefit from their hard work and success without suffering a massive drain of equity from capital gains and estate taxes on their accumulated wealth.
The capital gains tax is essentially a profit tax. The Federal Government will impose a tax as high as 20% on the capital gain plus a 3.8% Affordable Care Act surcharge, and most state governments will impose significant taxes on these transactions as well. For example, California will presently collect up to an additional 13.3% and New York will collect up to 8.8% on sales that are subject to the tax rates of those respective states (plus an additional city tax if the property is located in New York City). And if any portion of the capital gain is attributable to the recapture of depreciation then the total rate of taxation on the capital gain will be even higher.